Finance glossary

Plain-language definitions of the personal finance and Open Banking terms you will meet in Penge and in everyday banking. Use it to understand your money and get more out of the app.

Account Information Service Provider (AISP)

An account information service provider (AISP) is a company licensed under PSD2 to read your bank account data, such as balances and transactions, once you give consent. Budgeting apps rely on an AISP to fetch your accounts securely, without ever seeing your bank login.

Annual Percentage Rate (APR)

APR expresses the yearly cost of a loan or credit as a single percentage, including interest and mandatory fees. In the Nordics this is usually shown as the effective rate, which lets you compare offers on a like-for-like basis.

Annuity loan

An annuity loan is repaid in equal total instalments over the term, so each payment is the same amount. Early on most of the payment is interest and little is principal; over time the interest share falls and the principal share rises.

BankID

BankID is a national electronic ID used to log in and sign securely online, widely used in Norway and Sweden (the two systems are separate). When you connect a bank through Open Banking, you approve the connection with BankID, and your details are never shared with the app.

Budget

A budget is a plan for how you will spend and save your money over a period, usually a month. It sets an expected amount per category so you can compare planned against actual spending and adjust as you go.

Cash flow

Cash flow is the movement of money in and out over a period: income coming in versus expenses going out. Positive cash flow means you take in more than you spend; negative means the opposite.

Categorization

Categorization is the sorting of transactions into groups such as groceries, rent or transport, so you can see where your money goes. Penge suggests a category for each transaction and applies it automatically only when confident, and you can always change it.

Compound interest

Compound interest is interest earned on both your original amount and the interest already added, so savings or debt grow faster over time. The longer the period and the more often interest is added, the greater the effect.

Consent (requisition)

Consent, called a requisition in some Open Banking systems, is your explicit approval that lets an app read specific account data for a limited time. It is time-limited, usually up to 90 days, and you can renew or revoke it at any point, in the app or with your bank.

Debit vs credit card

A debit card draws money directly from your bank account, so you spend what you already have. A credit card draws on a credit line from the issuer that you repay later, often with interest if you do not pay the balance in full.

Direct debit

A direct debit is a standing permission that lets a company collect payments from your account automatically, with the amount and timing set by the biller. It is common for bills such as utilities and subscriptions; it is called AvtaleGiro in Norway, Autogiro in Sweden and Betalingsservice in Denmark.

Discretionary spending

Discretionary spending is money spent on non-essential wants, such as eating out, entertainment and holidays, rather than on needs. It is the part of a budget you can most easily cut back when you want to save more.

Emergency fund (buffer)

An emergency fund, or buffer, is money set aside for unexpected costs such as repairs, illness or losing your job. A common guideline is to save three to six months of essential expenses in an account you can access quickly.

Fixed vs variable expenses

Fixed expenses stay roughly the same each month, such as rent, insurance and loan payments. Variable expenses change with your choices and usage, such as groceries, fuel and eating out, and are usually easier to adjust.

IBAN (International Bank Account Number)

An IBAN is a standardised international format for a bank account number, used to route payments correctly across borders. It starts with a two-letter country code and check digits, followed by the domestic account number.

MitID

MitID is Denmark's national digital ID, used to log in and approve actions securely online. It replaced the older NemID. When you connect a Danish bank through Open Banking, you approve the connection with MitID, and your details are never shared with the app.

Net worth

Net worth is what you own minus what you owe: the total value of your assets, such as savings and property, less your debts, such as loans and credit. Tracking it over time shows whether your overall finances are improving.

Nominal vs effective interest rate

The nominal interest rate is the stated rate before fees and compounding. The effective interest rate includes fees and the effect of compounding, so it reflects the real yearly cost or return and is the better figure for comparing offers.

Open Banking

Open Banking lets you securely share your bank account data with apps you choose, through a regulated connection rather than by handing over your login. It is the technology that lets Penge read your balances and transactions with your consent, without moving any money.

Overdraft

An overdraft lets you spend more than the balance in your account, up to an agreed limit, leaving the account with a negative balance. It is a form of short-term credit and usually carries interest and sometimes fees.

PSD2

PSD2 is the EU's second Payment Services Directive, the regulation behind Open Banking. It requires banks to let licensed third parties access account data with your consent, and it introduced stronger login security across Europe.

Recurring payment (subscription)

A recurring payment is a charge that repeats on a schedule, such as a monthly streaming subscription or gym membership. Because they are easy to forget, reviewing your recurring payments regularly is one of the simplest ways to cut waste.

Savings rate

Your savings rate is the share of your income that you save rather than spend, usually shown as a percentage. A higher savings rate builds your buffer and net worth faster and shortens the time needed to reach financial goals.

Strong Customer Authentication (SCA)

Strong Customer Authentication (SCA) is a security requirement under PSD2 that verifies your identity using at least two independent factors, for example something you know and something you have. It is why you confirm logins and payments with methods like BankID or MitID.

The 50/30/20 rule

The 50/30/20 rule is a simple budgeting guideline: spend about 50 percent of after-tax income on needs, 30 percent on wants and 20 percent on savings and debt repayment. It is a starting point you can adjust to your own situation.

Zero-based budgeting

Zero-based budgeting means giving every unit of income a job until nothing is left unassigned, so income minus all planned spending and saving equals zero. It gives you a deliberate plan for the whole amount rather than letting money drift.